Claim inception rate vs claim termination rate

Discussion in 'SP1' started by Satya, Mar 17, 2018.

  1. Satya

    Satya Member

    Hello,

    I'd just like to double check that my understanding of these terms is correct. I believe they are mostly applicable to Income Protection and Long Term Care insurance.

    The claim inception rate is the probability that a benefit will be paid to an individual in the year of age x to x + 1. It is typically derived from the "sickness inception rates" by multiplying them by the probability of remaining sick throughout the deferred period.

    The claim termination rate is the probability that a claimant will stop receiving benefits in the year of age x to x + 1, e.g. because of a full recovery or death.

    The former term is defined in the core reading, but I do not believe the latter term is defined in the core reading. So really I'm just double checking that my understanding of claim termination rates is sound.

    Thanks!
     
  2. Anna Walklate

    Anna Walklate ActEd Tutor Staff Member

    Claims terminate due to three possible events: recovery, death and reaching the expiry age (or term) under the policy. It is a very general definition and when analysing their experience, insurers will be a lot more specific about the exact definition they use.

    Similarly, "claim inception rate" is a very general term - it simply refers to a rate at which claims start. The definition you are referring to (including year of age) is a specific example given in Chapter 17.

    I hope that helps!
     
    Satya likes this.

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